Years ago, I misjudged the negotiating power of one of our largest customers. The customer was a national retail chain that routinely paid 20 to 30 days beyond our terms. I decided to draw a line in the sand when the account slipped to more than 45 days past due with no payment commitment offered. I left a voicemail message with the customer’s Controller indicating that if payment was not received within 7 days, the account would go on shipment hold. I expected a quick return call.
Instead, the division President [meaning my manager’s boss] received a call from their Purchasing Manager who said something like this: “We were just told that our account will be on credit hold 8 days from today. If this happens, your company will be taken off our preferred supplier list that day, meaning you can forget about the $10 million a month in purchases we have forecasted. Let me know what you decide to do.”
I often write and speak about the need to be more assertive in debt collection. From time to time, I have to remind myself that creditors are not always in the best negotiating position. In the situation described above, in return for (1) my sincere apology to the customer and (2) a promise never to test the limits of our bargaining power with any of our 50 largest customers again, I negotiated a deal to keep my job.
The moral of the story is this: Know with whom you are negotiating, and adjust your strategy accordingly.
Have you ever had a negotiation take an unexpected turn?
By: Michael C. Dennis. Michael is the co-author of the Encyclopedia of Credit. Please visit www.encyclopediaofcredit.com